What the proposed trust tax overhaul means for business owners

For small business owners, investors and family groups using discretionary trusts, the key message is not to panic, but not to ignore it either. Many businesses use trusts for asset protection, succession planning and flexibility in distributing income. A higher baseline tax may change the equation, particularly where profits are regularly distributed to lower-income beneficiaries or where business structures were established years ago and have not been reviewed since.

Treasury’s paper points to transitional relief that could make restructuring easier. That includes proposed access to small business restructure rollover relief, potentially covering a broader range of discretionary trusts and assets. In simple terms, the Commonwealth is looking at ways to reduce the capital gains tax shock that could arise when assets are moved from one structure to another.

The unresolved issue is stamp duty. Unlike income tax and capital gains tax, duty is imposed by states and territories. That means a restructure that looks workable under federal tax rules may still trigger a significant state-based cost, depending on the assets involved and where they are located. Property, goodwill and business assets can all require careful review before any move is made.

Business owners should treat the consultation period as an opportunity to get organised. Useful first steps include:

• reviewing why the trust was originally established and whether those reasons still apply;
• checking which assets sit inside the structure, including property, loans and intellectual property;
• modelling the costs of staying put versus restructuring with modelling the costs over several years;
• seeking professional advice before changing finance, ownership or insurance arrangements.

This is also a reminder that tax settings and finance decisions are closely connected. A change in entity structure can affect loan covenants, refinancing options, insurance ownership, guarantees, succession plans and cash flow. The cheapest tax outcome is not always the strongest commercial outcome.

Consultation is open until 31 July 2026, with legislation expected later. Until the final law is known, the most sensible approach is preparation rather than rushed restructuring. Owners with trusts should gather documents, understand their exposure and be ready to act once the rules are settled.